Sole Proprietorship — Flashcards

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A sole proprietorship is a business owned, financed, and controlled by a single person. The owner, called the proprietor, is responsible for the profits and losses of the business.

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It is called a one-man business because one person owns it, manages it, controls it, and takes the risk of profit or loss. All major decisions are made by that single owner.

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A proprietor is the single individual who owns a sole proprietorship business. The proprietor supplies capital, manages the business, controls it, and bears the profits and losses.

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Single ownership means that one individual alone owns the entire business. The total capital may come from personal wealth or borrowed funds, but ownership remains with one person.

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One-man control means the proprietor alone takes decisions about the business. Other people may help in work, but final control remains with the owner.

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A sole proprietorship has no separate legal identity from its owner. The business and the proprietor are treated as one, so if the owner dies or becomes insolvent, the business is dissolved.

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Unlimited liability means the proprietor is personally liable for the debts of the business. If business assets are not enough, the personal property of the proprietor can be attached.

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No profit-sharing means the sole proprietor alone receives all the profits and also bears all the losses. No other person shares the reward or the risk.